Despite federal delays, bundled payments will be entrenched in US healthcare

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Amid yet another delay in CMS-led bundled payment programs, the popular value-based reimbursement model seems poised to continue as a favorite for providers. Bundled payments serve as an entry to value-based care because of the relatively low risk providers take on. And while these programs aren't yet proven to be successful, there is enough positive data to excite those who champion paying for healthcare based on value.

Bundled payment models have been around for decades, but they really started to grow as President Barack Obama took office and the CMS started to role out demonstration projects and other initiatives. Although CMS under the current administration is less enthused for bundled payments, the industry trend isn't likely to stop.

Private payers are getting in the game, too, so hospitals should invest in EHRs that allow real-time care coordination, and should consider trying voluntary programs as an onramp to the process.

More delays

CMS in recent months has delayed starting and expanding bundled payment programs that would further move payments from fee-for-service (FFS) to a value-based system. The delays have caused concerns in the industry, but CMS said they allow for additional review and feedback from the industry.

The American Hospital Association supported the delay in April, but spoke out against additional delays and potential burdens on providers. “As it exists, the rule places too much risk on providers with little opportunity for reward in the form of shared savings, especially in light of the significant upfront investments required,” said AHA Executive Vice President Tom Nickels.

David Terry, founder and CEO of Archway Health, which helps providers set up bundled payment programs, told Healthcare Dive everything he’s seen shows CMS remaining committed to bundled payments. “CMS’ message has been consistent for some time both pre-election and post-election around bundled payments."

And this seems to be true. The rule that delayed the bundled payments in May stated, "[W]e believe these models will further our goals of improving the efficiency and quality of care for Medicare beneficiaries receiving care for these common clinical conditions and procedures," signaling the agency may eventually come around to making the program final.

Terry said the delays have to do with the slow wheels of bureaucracy and transitioning to a new administration. “I would love to see it go faster. But I think they feel they are going pretty fast,” he said.

Carolyn Magill, CEO at bundled payment manager Remedy Partners, told Healthcare Dive she also expects CMS will continue to support bundled programs. “Dr. Price has indicated he is a supporter of voluntary bundled payment models; we suspect CMS will look to build on the early successes of bundled payments as they iterate on new models.”

Bundled payments’ momentum

Providers like bundled payment programs because the models allow them to take part in a value-based payment program without as much risk as more comprehensive methods. Providers can adopt bundled payments without having to make wholesale changes and go fully into a value-based contact

Magill said bundled payments and the Bundled Payment for Care Improvement (BPCI) program are “thriving.” There are 186 diagnosis-related groups in 48 bundles that are part of the BPCI program. “Bundles are a tool to reduce the fragmentation of care, a means to treat the whole person,” she said.

Bundled payment programs are expected to keep growing. McKesson released a white paper last year that said health plans predict bundled payments will grow more than capitation and shared risk growth in the next five years.

Magill agrees that bundled payment programs are the future of U.S. healthcare. “We will soon see the expansion of bundles beyond medical services to include pharmacy, behavioral health and social determinants. In the future, bundled payments will increasingly become a building block for contracting strategies across the spectrum of models related to the transition to value-based care.”

One reason behind an expected growth in bundled payment programs is that studies of value-based care and bundled payments have shown mostly positive results. For example, Magill said Remedy found a 6.1% reduction in unnecessary hospital readmissions because of care coordination, risk assessments and protocols practiced in the bundled approach to care. Another joint bundled payment model reduced spending by more than$5,000 per episode.

Cleveland Clinic also found success with bundled payment for total joint replacement, and said what's key to seeing benefit is a redesign across the entire episode of care. After finding success at its Euclid Hospital, Cleveland Clinic expanded the program to nine other hospitals.

On the other hand, not everyone has found total success with bundled payments and value-based care. CMS found results for orthopedic surgery bundles varied. For instance, bundled payment programs yielded savings of more than $860 per episode, but spinal surgery episodes increased costs.

Another recent report from New England Journal of Medicine found that value-based programs did not improve measures in clinical process or patient experience and didn't significantly reduce two of three mortality measures.

So far, studies lean more to the positive side. Michael Abrams, co-founder and managing partner of Numerof & Associates, told Healthcare Dive studies that have shown improved quality and lower costs found that much of the savings come from low-hanging fruit. This is namely due to lower costs that are achieved by negotiations with manufacturers and more selective use of cost-intensive post-acute care.

Abrams said value-based care that requires provider accountability for outcomes and “prudent resource use” are the best way to maintain healthcare costs. “There is no single key to success," he said. "As with most complex processes, efficiency and superior outcomes require a multidimensional solution, including things like better coordination of care, better preparation of patients and post-acute monitoring, post-acute care differentially prescribed based on patient risk factors, etc.”

Despite CMS delays, hospitals are already preparing for a business model change, according to Numerof & Associates' recently published State of Population Health Survey.

How will bundled payments affect hospitals?

Magill said a key part of hospitals’ bundled payments success is enhanced communication channels that allow “timely, relevant data as patients access care.” Hospitals are well-positioned to succeed in bundled payments, but value-based payments require administrative changes and financial risks as the system transitions from FFS.

Terry said hospitals and specialist groups may feel overwhelmed with the changes to a bundled payment program. However, bundled payments mean more autonomy and funding to manage patient populations.

With more autonomy and control comes more accountability, however. Transitioning to bundled payments also takes time and organization, but Terry said it’s a positive for providers and aligns "the interests of providers with those of payers and even patients.”

“In this scenario, acute care will ultimately constitute a smaller component than currently, so hospital payments could well shrink. However, if hospitals take the appropriate action they can sustain and even grow their bottom lines by more coordinated and prudent use of resources,” he said.

Despite the positives of bundled payments, there are still concerns about bureaucratic burdens like online forms and other tasks that are more about checking off boxes than producing better care. Abrams said providers fear wasting resources to comply with bundled payment program requirements that don’t influence meaningful outcomes.

Making bundled payment programs mandatory is also concerning some in the industry and notably the HHS secretary. However, Abrams said mandatory programs are needed if the goal is systemic healthcare change. Plus, mandatory programs are better for research and studying the impact of bundling payments and similar models.

“That being said, there is value in reconfiguring such programs to focus more on outcomes achieved, and less on dictating the process used to get there,” said Abrams.

Abrams said payers support HHS’ move to bundled payments and other alternative payment models. The HHS initiatives have given private payers cover and incentive to follow suit. “Payers want more predictability in the cost of care, and bundled pricing and other mechanisms tying payment to outcomes provide this,” said Abrams.

All stakeholders need to have skin in the game and enough information to make informed decisions if healthcare is going to deliver better outcomes at lower cost, he said.

What hospitals should do to prepare

While payers and providers both believe that bundled payments and a value-based system are the future, many of them say they aren't ready yet. The McKesson report found that only half of payers and 40% of providers say they can implement bundles now.

Magill said hospitals should invest in the necessary technology, like EHR connectivity between payer and provider that allows for real-time information exchange. This also plays an important role in value-based programs because it allows providers to coordinate care and view a patient's entire medical history and conditions, including co-morbidities.

Terrysuggested hospitals at least look into voluntary programs that allow them to get data they can evaluate to make informed decisions.

Only 1,500 providers went live with BPCI, which Terry said surprised him. The program was open to many different types of providers and offered data and insight opportunities. He figured tens of thousands of providers would go live with the program, but they may have been scared off by the degree of change required and concerns that the program would be too complicated.

Terry said hospitals can plan all they want, but they won’t really know what it’s like until they take the plunge. He likened it to having children — you think you know what it will be like, but you really have no idea until it happens.

Future of bundled payments

CMS has a goal of transferring 50% of traditional FFS Medicare payments to alternative payment models by 2018. Given CMS’ delays, the questions are whether CMS will still reach that goal and what will happen to the industry if it doesn't.

Abrams said CMS can likely claim to reach their goal because of the “roster of initiatives that bear some connection to alternative payment models.”

“Achieving such a milestone will, of course, mean little if it doesn't force change across the delivery system, and it will also have nominal impact on the cost and quality of care. If, on the other hand, the milestone is clearly not reached, it will be confirmation to the industry that the future of healthcare, at least under this administration, will not change as much as it needs to and as much as many had feared,” said Abrams.

There is another bundled payment announcement expected this summer — the next iteration of the BPCI program. No matter when CMS announces its next bundled payment program, Terry said CMS will continue bundled payments — regardless of the delays and the HHS secretary's opposition to mandatory programs.

“There will likely be more delays, but everything we’ve heard and everyone expects in the industry is that it’s coming,” said Terry.